If you have decided to attempt a short sale on your property, it’s likely that your lender will request that you submit a hardship letter as part of your short sale package. The hardship letter is an opportunity to give the lender your personal account of your financial standing and the circumstances that led you to where you are. Although the hardship letter is only one piece of the puzzle in your short sale package, it’s an important one. Creating a compelling and convincing appeal to your lender will vastly improve your chances of a successful short sale.

We guide and help all our clients to put together an effective hardship letter that is heartfelt, convincing and full of relevant personal facts. Let’s take a closer look at the content we recommend to include, as well as, the do’s and don’ts we recommend when crafting an effective hardship letter.

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The Importance of the Hardship Letter

This is your opportunity to persuade your lender that a short sale is your only available choice and is the best course of action. If you truly do meet the criteria of a short sale, it is likely that a short sale is beneficial not only to you, but also to your lender. The goal is to explain why you’ve found yourself in these unfortunate circumstances and to show that you are out of alternative options; it’s either a short sale or a foreclosure.

Keep in mind that the loss mitigator that will review your hardship letter is human too. These are emotional circumstances; we encourage you to not be afraid to appeal to the lender’s emotions when describing the hardships that have led you to your current situation. An empathetic lender may be able to relate to your struggle, or at least feel empathy toward your difficulties, increasing your chances of approval. We have seen this time after time again; appealing to the emotions of the person on the other ends works, sometimes turning a “no” into a “yes”.

Can’t overcome your ‘writers block’? If putting together the hardship letter is causing stress during an already stressful time, let us help you. We’ll discuss your situation in detail and will compose a sincere, heartfelt letter on your behalf. We are here to help in any way we can.

What Qualifies as a Hardship?

When dealing with short sales, a hardship is defined as some uncontrollable change of circumstances that has rendered you incapable of repaying your debt to the lender. Simply owning a home that is worth less than you owe on it, also referred to as an “underwater” home, doesn’t qualify as a hardship. If you’re hoping to perform a short sale just to free yourself from a negative equity home, rather than because you really have no other option, the lender is less likely to show you any sympathy. Homeowners that really have exhausted all other options and can convey that truth to the lender have the greatest chances of success.

Although there are many potentially qualifying circumstances, some of the common situations that may qualify you for consideration are:

  • A divorce
  • Hefty medical expenses
  • Loss of employment
  • A pay cut or reduction in working hours
  • Job transfer
  • Military enlistment
  • Legal expenses
  • Alteration to mortgage terms such as an adjustable-rate loan
  • Unexpected damages due to a natural disaster
  • Required costly repairs that will put you “underwater”
  • Change in financial standing due to a lawsuit
  • Disability
  • Incarceration
  • Death of an income provider

Writing Your Hardship Letter

Many short sale applicants breeze through their hardship letter, trying to get it over and done with as quickly as possible. We advise that you take your time when creating the letter as it’s your one shot to win over your lender. Many people opt for using a premade template off of the internet and simply inputting a few snippets of their personal information. Bear in mind that these lenders read hundreds of these hardship letters, they’ll know a pre-made template when they see one. By personally crafting your letter, you not only differentiate yourself from the pack, but also show the lender that you’re putting effort into making it work. Going the extra mile may mean the difference between approval and denial of your request.

When writing the letter, be sure to include the following content:

  • Contact Information
    In the header of your letter, be sure to include your loan number, full name, home address, phone number, and the date. All of the persuasion in the world is worthless if they don’t know who’s asking, right?
  • Introduction
    Start off your letter by making your intentions clear. Let the lender know that you’re hoping to gain their approval for a short sale and inform them that you’ve already exhausted all of your alternatives. If possible, list what you have tried without success, such as loan modification, deed-in-lieu, etc.
  • Body
    The body of your letter is where you want to go into in-depth detail about your current situation and the hardships that have brought you to this point. You should also include any steps that you took in an attempt to improve the situation before requesting short sale approval and how or why they were unsuccessful. You want to be thorough in your explanation of your hardships but brief enough to not lose their interest.
  • Conclusion
    When concluding the letter, be sure to let the lender know that you would fulfill your loan obligation if you could, but you’re simply incapable of doing so. Make it clear that the situation has come down to two possible outcomes: either a short sale or a foreclosure. Showing humility is also never a bad idea, be sure to sincerely thank your lender for their consideration toward the end of your letter.

Hardship Letter Length

Some lenders may request a hardship affidavit rather than a hardship letter. Although the two items serve the same purpose and require essentially the same information, they are a little different. The affidavit is a form to be filled out rather than a letter to be written. In addition to the boxes that must be checked off, some affidavits also contain a short section for an explanation near the bottom. Affidavits are also considered sworn statements, so lying on them carries heavy legal consequences. Be sure to check with your lender to see which they require as part of the short sale package before starting on a letter.

Things to Avoid in Your Letter

  • Use Figures in Your Letter
    When you’re explaining your situation to the lender, don’t be afraid to include numbers to paint a clearer picture. For example, if you’ve taken a pay cut, don’t just say “I’m earning less money now” say “I’ve taken a 30% reduction in my salary.” If you have utilized other creditors to finance your mortgage, don’t say “I’ve been making mortgage payments on a credit card” say “I’ve accumulated $8,000 in credit card debt trying to stay current on my mortgage payments.” These exact figures will give the loss mitigator a better idea of how dire your situation is and add validity to your argument.
  • Don’t Sugar Coat It
    Many homeowners find it difficult to speak openly about their situation. They may be embarrassed, still working through the emotions of their hardship, or they may just not want to face their reality of their finances. When constructing your letter, it’s important that you don’t hold back on the details. Paint as raw of a reality as possible for the lenders. The worse off your situation is, the more likely you are to end up in a foreclosure. The more likely a foreclosure seems, the more likely the lender is to approve your short sale application.
  • Make the Short Sale Appealing
    Although the lenders aren’t against you, they’re certainly more concerned with their own financial well-being than yours. This means that you have to focus on the benefits to the lender rather than to yourself. Luckily, lenders aren’t very fond of foreclosures either. The foreclosure process is lengthy and expensive to lenders, typically costing them a large amount of the sale’s proceeds. You must convince the lender that allowing you to perform a short sale will allow them to recoup a greater amount of their loan than they would gain through a foreclosure. Proving that the short sale is a mutually beneficial agreement, rather than just a bailout for you, will maximize your chances of success.
  • Explain the Permanency
    Briefly explain that your hardship is permanent or is incurable. For example, if you have a short term illness and cannot work, the lender can offer a deferred payment plan until you are able to begin working within a reasonable amount of time. A permanent hardship lasting several months at the very least can be due to a divorce, significant medical bills, or unexpected required repairs such a structural issue.
  • Be Polite and Sincere
    Can you read emotion in written word? We think so. A good hardship letter will use polite wording, grateful attitude and a sincere, heartfelt verbiage pertaining to the difficulties you are experiencing. The person reading your hardship letter is a human with a heart and their own difficulties. If they can relate to your situation or ‘feel’ your pain, they are more likely to help you.

Composing an effective hardship letter requires work and effort. It is a work of Art finding the right balance of cold facts with the raw appeal of emotion. Hiring a skilled real estate agent experienced in short sales can make or break your chance of getting the short sale approved.

Reach out to us for a confidential conversation to see if we can help you navigate this difficult process with simplicity and ease.

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Request a Free, No Obligation, Confidential Consultation.

Please fill out the form below and we will contact you shortly or alternatively call us at (216) 270-7488


Additional Resources

We have put together a comprehensive list of resources going over the process, short sale nuances as well as a very thorough list of Frequently Asked Questions that goes over most questions you may have about short sales.

A quick guide explaining what the short sale process is, qualifications for a short sale, your responsibilities as a seller, necessary financial paperwork and the lender’s process.

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A comprehensive Frequently Asked Questions guide summarizing the basics as well as in-depth short sale questions. If you are limited on time, this would be the resource to read.

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An effective Hardship Letter is so important that we put together a separate resource focusing on composing an effective letter that will increase your odds of getting your sale approved.

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If you have more then one loan on your home such as a home equity line of credit or another type of credit, the short sale process gets more complex. Find out the details on what can be done here.

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If your home loan has Private Mortgage Insurance, or PMI (it is usually part of o your monthly payment), getting your short sale approved may be more challenging. Read more here.

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While every short sale is different, sometimes short sales fail. Find out the most common reasons a short sale can be unsuccessful as well as what, if anything, can be done in each scenario.

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